DO I NEED DISABILITY INSURANCE?

Both disability and life insurance are pieces to comprehensive coverage for you and your family should a disabling event or a life-ending tragedy occur. What type of coverage and what amount of coverage is needed to protect your future is something you should discuss with an experienced disability attorney.

In the meantime, here are a few things to consider if you are looking into purchasing disability insurance:

If you are not working or no longer working, you probably do not need disability insurance. For example, if you are retired and your income comes from investments or other retirement account, disability insurance is unnecessary. While you may consider purchasing life insurance for other members of your family, it is likely unnecessary to purchase disability insurance for a spouse who does not work or for non-working children.

Deciding how much disability insurance is enough can be tough. Often insurers will offer policies covering 50 to 70 percent of your normal wages. The idea is that the amount uncovered remains as an incentive to get back to work as soon as you are able. But, there are other considerations to make in determining how much coverage is enough, for example, will you be able to put money away for retirement with the amount of disability wage replacement you will receive? If you are off work on disability, you may be unable to contribute to an employee-sponsored retirement account.

Many workers have the option to buy into an employer-sponsored disability plan. If your premiums are paid with after-tax dollars, you should be able to collect any disability payments tax-free for the duration of your disability. Knowing the tax consequences of disability insurance can help you determine what amount of coverage you may one day need.

Source: CBS Money Watch, “Tips for buying disability insurance,” June 25, 2013